Financing a New Home and Interest Rates in Texas

October 25th, 2022
interest rates on homes in texas

Owning our own home is something that we all aspire to. It’s part of the American dream and a symbol of financial stability and independence. Most of all, it gives us a place to raise our families and build memories together. However, very few of us can buy a house or any other type of real estate with cash. Financing a new home is the most common way of acquiring one. It’s the single biggest purchase most of us will ever make, so a lot goes into financing a new home. When you’re a first-time home buyer, the journey to homeownership is exciting and new, but it can also be stressful. Fortunately, you can set yourself up for success by learning about interest rates on homes in Texas and other important terms and situations that are part of the home-buying process. We’ve got a primer to help get you started!

Financing and interest

Financing a new home is a big decision and an involved process, but the concept behind it is fairly easy to understand, especially if you’ve ever purchased anything with a loan or by using your credit card. While the amount of money (and paperwork) that goes into financing a new home is a lot bigger, the idea is the same. A lender (usually a bank) gives you a loan (called a mortgage) that allows you to buy the home of your dreams. Then you pay back the loan balance, along with the interest that accrues over time. Most mortgages give you either 15 or 30 years to pay them back, and they have either a fixed or a variable interest rate.

Interest rates on homes in Texas

Interest rates fluctuate over time, affected by the housing market, the interest rates set by the Federal Reserve, and by other factors. At the time of this writing, the interest rate on a roughly $400,000 home in Texas for a buyer with a 20% down payment and a credit score between 740 and 799 would be around 6.967%. As you can see, a lot of factors influence not just the average interest rate, but the specific interest rate that you will pay. A larger or smaller down payment, better or worse credit scores and the ultimate value of your home may all impact your interest rate. As we said, the market is in constant flux, so the best thing to do when you’re interested in financing a new home is to talk to your bank or mortgage lender about interest rates on homes in Texas as they stand when you’re looking at getting pre-approved.

Important questions to ask yourself early in your search!

Are my credit reports accurate and up-to-date? Because your credit score impacts not just your interest rate but your ability to secure a loan in the first place, this is one of the first questions you should answer when you begin shopping for a new home. Order your credit files from all three major credit bureaus (Equifax, Experian, and Trans Union) and be sure that everything on them is accurate.

What information will I need to apply for financing? Your lender will want to see documentation of your income, your tax records, proof of employment, your bank accounts, and any other assets or liabilities you may have. Because this will be one of the first things a lender asks for, it’s a good idea to have as much of it as possible ready to go before you even begin looking for a new home.

Where do I shop for a mortgage? There are a lot of mortgage lenders out there, so how do you know where to go when financing a new home? Start with your own bank. You already know the folks at your bank and probably have a good working relationship with them. However, your bank may not always be the best place to secure a loan. If you have a financial advisor or a realtor, they may have recommendations, or you can talk to family and friends to see who they recommend. You can also look up mortgage lenders online and check review sites like or which rank top mortgage lenders. Whoever you talk to, be prepared to take notes!

What can I afford in the way of a mortgage? This is an excellent question. Just because you can get a loan doesn’t necessarily mean that you can pay it back, and buying a home you can’t afford is a quick ticket to heartache. Knowing what kind of mortgage you can afford may take some calculation. Most lenders will take your financial information and enter it into automated models that calculate how much they think you can afford to pay every month. You may not agree with them, however, and even if you qualify for a much bigger loan than you’re comfortable with, you should buy a house that you can afford to make payments on.

What do you need to know about popular loan types?

There are several different kinds of mortgages, designed for different types of properties and homebuyers in different situations. To know what type of loan is right for you, you’ll need to understand not only your own situation but the types of loans that are available. Here are a few of the more popular ones:

Conventional loans

These are loans that are given out entirely by the lender and not subsidized by the federal government. Because they are higher risk, they may also have higher requirements and be more difficult to qualify for. However, they are also available to everyone, assuming you meet your lender’s requirements.

VA Loans

Active and former members of the U. S. military and some eligible spouses may qualify for a loan backed by the U. S. Department of Veterans Affairs. These VA Loans bring with them a number of benefits, including lower credit score requirements and no down payment, in many cases.

New home construction loans

So far, we’ve been discussing buying an existing home. But many home buyers instead choose to have a new home built from scratch. Getting a mortgage for a home that isn’t built yet is a different process, but in many ways, it is also similar to financing a new home any other way.

FHA loans

Many buyers, especially those with less-than-perfect credit, take advantage of loans backed by the Federal Housing Administration. These loans help put home ownership in reach of individuals with lower credit scores and smaller down payments. You can qualify for an FHA loan with a credit score as low as 500, and if your credit score is 580 or above, you’ll only need a 3.5% down payment. These types of loans often have limits on how much you can borrow, but it is frequently more than enough to buy the home of your dreams.

Ask about builder financing

If you’re buying a new-construction home, your homebuilder may have financing options available for you. Many of them have financing information on their website. If you have questions, you can always contact a builder’s representative.

If you’re looking for a new home in Texas, look no further than Mantua Point. We’ll help you through every step of the process, from finding the home of your dreams to securing the financing you need. All that’s left is for you to move in and begin enjoying a life you’ve always dreamed of. To learn more or schedule a tour, contact us today!